General Inv. Co. v. Lake Shore & M.S. Ry. Co.

• Decision Date: 08 December 1920
• Docket Number: 3425.
• Citation: 269 F. 235
• Parties: GENERAL INV. CO. v. LAKE SHORE & M.S. RY. CO. et al.
• Court: U.S. Court of Appeals — Sixth Circuit

269 F. 235

GENERAL INV. CO. v. LAKE SHORE & M.S. RY. CO. et al.

No. 3425.

United States Court of Appeals, Sixth Circuit.

December 8, 1920

F. A Henry, of Cleveland, Ohio, and Elijah N. Zoline, of New York City (Snyder, Henry, Thomsen, Ford & Seagrave, of Cleveland Ohio, on the brief), for appellant.

Walter C. Noyes, of New York City, and S. H. West, of Cleveland Ohio (Robert J. Cary, of New York City, on the brief), for appellees.

Before KNAPPEN, DENISON, and DONAHUE, Circuit Judges.

DENISON Circuit Judge.

The General Investment Company filed a bill to enjoin the consolidation of the Lake Shore and the New York Central Railroads. The District Court dismissed the bill, because jurisdiction was not acquired over the New York Central, and that was thought essential to the object of the suit. On appeal to this court, we affirmed the conclusion as to the lack of jurisdiction over the New York Central; but we thought that some of the relief prayed might, in a proper case, be granted against the Lake Shore alone, and that, to that extent, the New York Central was not an indispensable party. Accordingly, we reversed the dismissal and sent the case back for further proceedings in accordance with the opinion. This is reported in 250 F. 160, 162 C.C.A. 296, and to that opinion we refer for a fuller statement of the essential facts.

After the remand, the bill of complaint was amended, so as to show that plaintiff's purchase of its five shares of stock in the Lake Shore was not, in fact, made until after the directors' consolidation agreement had been executed. Thereupon the defendant filed a further motion, in which it asked: (1) That the bill of complaint be dismissed, in so far as it was founded upon the Sherman Act (Comp. St. Secs. 8820-8823, 8827-8830), and this for the reason that a private individual could not maintain such a bill; (2) that it be dismissed in so far as it was founded on the Clayton Act (38 Stat. 730), and this for the reason that the state court, in which the suit was commenced, had no jurisdiction of a case founded on the Clayton Act; (3) that in so far as it was founded on the Constitutions or statutes of the several states it be dismissed because it did not state a good cause of action. The motion to dismiss was granted, and plaintiff appeals.

1. The Anti-Trust Act (Act July 2, 1890).-- The decision in Paine Lumber Co. v. Neal, 244 U.S. 459, 37 Sup.Ct. 718, 61 L.Ed. 1256, is clearly decisive and justifies the dismissal of this branch of the bill, unless the case may be distinguished from that, because this suit is by a stockholder and that was by a stranger. It is not correct to say that the court there decided only that such a suit could not be maintained under section 4 of the act (Comp. St. Sec. 8823), though that happened to be the language used; that case was not brought under section 4, and the plaintiff made no claim of any right given by that section; the decision was that that suit could not be maintained; and the reference to 'under section 4' must have been intended to express the thought that, under the effect of section 4 upon the whole act, the suit would not lie. It is now said that the effect of the Anti-Trust Act is to make a prohibited consolidation ultra vires of the corporation; that equity always had jurisdiction of a suit by a stockholder to enjoin his corporation from an ultra vires act; and hence that in such a suit as this the court of equity does not depend for its jurisdiction on the Anti-Trust Act, and the case is not one 'under the act.'

We are unable to see any distinction in principle, in this respect, between a stockholder's case and the Paine Case. A stranger who was about to suffer irreparable loss from unlawful acts of another had the right to proceed in equity for an injunction against that stranger, just as much as a stockholder did against his corporation. The jurisdiction of equity does not depend on the Anti-Trust Act in the suit by the stranger any more than it does in the suit by the stockholder; in each case alike, the only important effect of that statute is to make unlawful the act sought to be enjoined. The present case is brought 'under the anti-trust laws' no more and no less than was the Paine Case. It is to be noticed that, in the dissenting opinion in that case, the stockholders' cases, which had permitted the enforcement by injunction of rights dependent on the act, were approved; but the majority does not suggest that they are distinguishable, and we think that the effect of the majority opinion is to overrule them. The theory of the decision we think must be that the Anti-Trust Act declared certain rights and duties, that it intended there should arise therefrom only two remedies, a public one and a private one, each as specified, and that no other private remedy should depend thereon. Wilder Co. v. Corn Co., 236 U.S. 165, 174, 35 Sup.Ct. 398, 59 L.Ed. 520, Ann. Cas. 1916A, 118. It seems clear enough that the point as to which Mr. Justice Holmes said he was in the minority was as to the effect of the Clayton Act upon the right to an injunction against a labor boycott. Duplex Co. v. Deering (C.C.A. 2) 252 F. 722, 743, 747, 164 C.C.A. 562. Holding this view of the Paine decision, it follows that the court below was right in dismissing so much of this bill as was based on the Sherman Anti-Trust Act.

2. The Clayton Act (Act Oct. 15, 1914).-- Section 16 of this act (8835o, U.S.C.S.) provides that--

'Any person, firm, corporation, or association shall be entitled to sue for and have injunctive relief, in any court of the United States having jurisdiction over the parties, against threatened loss or damages by a violation of the anti-trust laws.'

The effect of this section undoubtedly is to permit maintenance under the Sherman Anti-Trust Act of that class of suits, the right to maintain which had been denied in the Paine Case; but since the present case was commenced in a state court, and was by defendant removed to the court below, we must inquire whether this section authorized the state courts to act, and, if not, then whether the removal to the federal court makes any difference.

The grant of jurisdiction is to the 'courts of the United States.' This language has been expressly held not to reach even territorial courts, although they were created by the laws of the United States. McAllister v. U.S., 141 U.S. 174, 179, 11 Sup.Ct. 949, 35 L.Ed. 693. Much less can it reach those courts which are wholly of another jurisdiction. It is true there are cases where this term has been thought to reach some of the courts of the District of Columbia (see Page v. Burnstine, 102 U.S. 664, 26 L.Ed. 268; United States v. Mills, 11 App.D.C. 500, 504); but that was because the language and purpose of the act in question were especially appropriate to be so extended. In the present case the statute was dealing solely with a subject-matter of exclusively federal jurisdiction, interstate commerce, and while Congress might have intrusted some of its exercise to the state courts, there is no reason to presume such an intention; the natural presumption is rather to the contrary. Not only had the ordinary meaning of the phrase 'courts of the United States' become fixed by familiar judicial construction long before the Clayton Act was passed, but it had been customarily used by Congress with the same definite meaning; for example, section 256 of the Judicial Code (Comp. St. Sec. 1233) refers to the 'courts of the United States' and the 'courts of the several states' as different classes, exclusive of each other. Further, this section pertains only to the remedy, and there would be a strong presumption that a federal remedial statute did not relate to the remedies of another jurisdiction. From these considerations we are satisfied that a suit brought in a state court can get no help from section 16.

When the case was commenced, the state court either had or had not power to give relief because of the federal anti-trust laws. If it had not, we do not comprehend how jurisdiction of the subject-matter could have been conferred by the removal to the federal court. The jurisdictional objection was not as to the person, but as to the subject-matter. In De Lima v. Bidwell, 182 U.S. 1, 174, 21 Sup.Ct. 743, 45 L.Ed. 1041, it was said that defendant neither gains nor loses by the removal, that the case proceeds as if no such removal had taken place, and that the defendant unquestionably has the right, in the federal court, to show that the state court had no jurisdiction. While these statements were made with reference to a different situation from that here existing, we see no reason to doubt their present applicability. It follows that the court below, like the state court, had no jurisdiction of the remedy given by section 16 of the Clayton Act, and could not grant any relief upon that theory. ^[1]

3. State Constitutions and Laws.-- So far as the relief prayed for was shown to stand upon the supposed violations of state Constitutions or laws, no question of jurisdiction is involved; but we must ascertain whether the bill states a good case for the relief sought. We find ourselves able to reach a conclusion upon this subject without inquiry into the ultimate question, elaborately argued by plaintiff, whether the Constitution and laws of (e.g.) Ohio prohibit such a consolidation of railroads as this was.

We first observe that, by the elimination of the New York Central and the failure to reach the Read Committee, a very large part of the allegations of the bill and of the prayers for relief have been left inoperative, and that, although the New York Central has been held not to be an indispensable party as to portions of the relief prayed, it is by no means clear just how...